Friday, August 19, 2011

Tax tease: How likely are you to be arrested for tax avoidance?

This week HMRC announced that five plumbers have been arrested for failing to pay the right amount of tax. A further 600 or so are under civil investigation by HM Revenue & Customs (HMRC) for failing to pay the right amount of tax. Some of those involved owe up to £150,000.

The arrests and investigations have taken place during HMRC's campaign titled the 'Plumbers Tax Safe Plan (PTSP)' . This invited plumbers, gas fitters, heating engineers and members of associated trades to get their tax affairs in order by the end of this month. But there was an earlier deadline of 31 May by when you had to notify HMRC you intended to 'fess up. The raids and arrests were of people who were known to be tax ‘ghosts’ - people who have not declared their earnings.

HMRC have announced that more raids are expected to take place over the coming weeks across the UK, including Yorkshire, Kent, Cambridgeshire, Tyne & Wear, Midlands and South Wales.

So how likely is it that you might be arrested for tax avoidance?

Simply stated it will NEVER happen. Not for tax AVOIDANCE anyway. But remember that the plumbers were not arrested for tax avoidance. What the plumbers did was to EVADE their tax obligations, and that's illegal. Which is why they have been arrested.

I have long argued that more publicity of this type of heavy-handed action by HMRC and the police would have a deterrent effect. I expect that it will encourage more people to come clean earlier. And hopefully more people will recognise the huge risk they take by conducting a business without telling HMRC what they are doing.

There are two problems however:

1 - Those people who would like to come clean and are now scared off by news of the arrests. Don't be scared. If you come forward voluntarily there is next to no chance of being arrested*.

2 - Those people who are paid cash in hand by 'employers' who refuse to comply with their obligations as employers. They would also 'sack' anyone working for them who threatens to tell HMRC what's going on. In such cases it is clearly the 'employer' who is in the wrong. They may be prosecuted by the workers would never be arrested in such cases.

*Whether you are a plumber, a gas fitter, a life coach, an ebay trader, a restauranteur, a medical professional or indeed anyone who has been evading tax, or you know someone who has, TAKE PROPER ADVICE. The same goes for you if you run a business that is evading VAT.

I haven't picked any of those categories at random. They are all referenced in recent pronouncements by HMRC. I've written about some of them in previous blog posts - see below. Even if your situation has yet to be addressed by a specific HMRC campaign, the penalties will generally be less severe for taxpayers who come forward voluntarily to put their affairs in order with HMRC. And in such cases these penalties will NEVER include imprisonment.

Taking PROPER ADVICE means speaking with an experienced tax consultant with specialist experience of negotiating 'back duty' settlements with HMRC. (Back duty is an outdated but still useful term to focus attention). Few local accountants are able to do this sort of work unaided. Which is why I recommend the Tax Advice Network.

Related posts:

1 comment:

  1. Great blog Mark! I've seen tweets from editors of top UK broadsheets saying "600 plumbers arrested for tax avoidance". These plumbers have not taken expert tax-avoidance advice for tax mitigation, they have simply failed the disclose their income. I can imagine HMRC had most, if not all, of the details it needed before it implemented the PTSP in the first place.